The cost of paying the piper

Faced with staggering debt, many Pennsylvanians jump at claims by debt settlement companies that they can eliminate the debt at a fraction of the face value.

But, not so much, as it turns out.

State lawmakers, responding to complaints by constituents who ended up in worse shape than when they began dealing with debt-settlement outfits, want to regulate the industry. But the proposal they're pressing isn't strong enough.

Debt settlement companies require consumers to stop paying on all of their debt, then use the debt as leverage to negotiate better deals with creditors. But that exposes consumers to having their credit downgraded and, in some cases, to lawsuits.

There are no guaranteed protections and it doesn't work. Up to two-thirds of people who have used debt settlement services have not had all of their debt settled.

Bills in the state Legislature, however, are inadequate to the task of consumer protection. They don't regulate fees, which often are in the 20 percent range, and they don't require operators to ensure consumers of what debt they will face at the end of the process.

Lawmakers should regulate the industry aggressively or outlaw it.

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